Russia to redirect trade elsewhere in case of EU-US sanctions

Russia will switch to other trade partners if economic sanctions are imposed by the US and the European Union, the Russian President's Press Secretary Dmitry Peskov has said.

"If one economic partner on the one side of the globe impose
sanctions, we will pay attention to new partners from the globe’s
other side. The world is not monopolar, we will concentrate on
other economic partners," RIA news quotes Peskov.

According to him, possible economic sanctions by the US and EU on Russia are
unacceptable, and the Russian Federation intends to offer further
economic cooperation with the European Union.

"We want to keep good relations with the EU and with the US.
Especially with the European Union as it is the main economic,
investment and trade partner of the Russian Federation. Our
mutual economic dependence assumes that we shall have good
relations," the Russian President's Press Secretary
declared. He also emphasized that discussion of global economic
problems without involvement of Russia can't be a complete
discussion.

In a Tuesday telephone conversation between Russia’s Minister for
Foreign Affairs Sergey Lavrov and the US Secretary of State John
Kerry they discussed the situation in Ukraine, and Lavrov said
sanctions imposed by the US and the European Union against the
Russian Federation are absolutely unacceptable and won’t come
without consequences.

According to data from the EU’s Eurostat, Russia accounts for 7
percent of imports and 12 percent of exports in the 28 European
Union bloc, making it the region's third most important trading
partner, behind the USA and China.

In turn, the EU is Russia’s biggest trade and investment partner,
with trade turnover estimated at $330 billion in 2012.

The introduction of sanctions may lead to a considerable
financial losses for the EU. “The set of economic measures which
the EU can apply is extremely limited”, says the deputy director
of Institute of economic prediction of the Russian Academy of
Sciences Alexander Shirov.

“The Russian economy is 3 percent of the world’s gross
domestic product. We generate a considerable volume of demand for
European products crucial to such countries as Germany, Italy and
France. The absence of normal trade and economic relations with
Russia essentially means losses for these countries," the
expert concludes.

The US is a much smaller trading partner for Russia, as its trade
turnover with Russia was about about a tenth of that with the EU
at $38.1 billion in 2012.In 2013, the value of its imports was
$26.96 billion, more than double the value of its exports.

Boomerang effect

US based companies that have strong business ties with Russia,
including General Electric and Boeing, are becoming increasingly
concerned over US plans to harden sanctions against Russia after
the association of the Crimea. Businesses are afraid of countermeasures from the Russian authorities, says
Bloomberg.

“The CEOs are obviously very concerned about what is
happening in Russia,” said John Engler, the president of the
US Business Roundtable of major CEOs. “For some companies,
it’s a substantial bit of their business. They are watching it
very intently, trying to understand what will happen and what the
next steps will be.”

The aviation subsidiary of General Electric, GE Capital Aviation
Services, has a fleet of 54 airplanes in Russia. The largest
aircraft leasing company in the world is watching closely the
development of interrelations. Boeing is afraid the demand for
airliners will fall if the dispute leads to a decrease in global
economic growth.

Some of the world’s biggest companies in the West have already
said they would run their businesses with Russia as usual and
won’t be involved in the political conflict.

Rex Tillerson, CEO of Exxon Mobil, that has major exploration
projects in Russia, said that the Texas-based company, wouldn’t
take sides in the conflict between Russia and Ukraine.

On a country level, Latvia has so far voiced the biggest concern
over sanctions against Russia, as the adverse effect would hit
the country the hardest compared to all the EU member states. The
country could lose up to 10 percent of its GDP, as the action
against Russia could have a big adverse effect, according to the
country’s Prime Minister Laimdota Straujuma. On Monday Latvia
also said that the EU should compensate any countries hurt by
sanctions against Russia.

On Wednesday the heads of nearly 100 companies from the Business
Roundtable association will meet in Washington to discuss the
question of sanctions.